The company's Alumina and Chemicals segment primarily consists of a series of
affiliated operating entities referred to as Alcoa World Alumina and Chemicals
(AWAC). Generally, Alcoa owns 60% and Alumina Limited (formerly WMC Limited) owns
40% of these entities.
Aluminum is one of the most plentiful elements in the earth's crust. Aluminum
is produced primarily from bauxite, an ore containing aluminum in the form of
aluminum oxide, commonly referred to as alumina. Aluminum is made by extracting
alumina from bauxite and then removing oxygen from the alumina. Alcoa processes
most of the bauxite that it mines into alumina. The company obtains bauxite
from reserves held by AWAC, from the company's interests in Brazil, and under
both long-term and short-term contracts and mining leases.
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum,
and alumina, and is active in all major aspects of the industry: technology,
mining, refining, smelting, fabricating, and recycling. Aluminum is a commodity
that is traded on the London Metal Exchange (LME) and priced daily based on
market supply and demand. Aluminum and alumina represent approximately two-thirds
of Alcoa's revenues, and the price of aluminum influences the operating results
of Alcoa. Nonaluminum products include precision castings, industrial fasteners,
vinyl siding, consumer products, food service and flexible packaging products,
plastic closures, fiber-optic cables, and electrical distribution systems for
cars and trucks. Alcoa's products are used worldwide in aircraft, automobiles,
commercial transportation, packaging, consumer products, building and construction,
and industrial applications.
Alcoa is a global company operating in 41 countries. North America is the largest
market with 65% of Alcoa's revenues. Europe is also a significant market with
22% of the company's revenues. Alcoa also has investments and activities in
Iceland, Australia, Brazil, China, and Bahrain, which present opportunities
for substantial growth. Governmental policies and other economic factors, including
inflation and fluctuations in foreign currency exchange rates and interest rates,
affect the results of operations in these countries.
Competitive Conditions
Alcoa is the world's leading producer of alumina, primary aluminum and fabricated
aluminum. Alcoa is subject to highly competitive conditions in all aspects of
its aluminum and non-aluminum businesses. Competitors include a variety of both
U.S. and non-U.S. companies in all major markets. Price, quality and service
are the principal competitive factors in Alcoa's markets. Where aluminum products
compete with other materials ' such as steel and plastics for automotive and
building applications; magnesium, titanium, composites and plastics for aerospace
and defense applications; steel, plastics and glass for packaging applications;
and wood and vinyl for building and construction applications ' aluminum's diverse
characteristics, particularly its light weight, recyclability and flexibility,
are also significant factors. For Alcoa's segments that market products under
Alcoa's brand names, brand recognition and brand loyalty also play a role.